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May 8, 2013

MSRB (Still) Awaits SEC Muni Advisor Rule; Plans EMMA 2.0

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Three years after passage of the Dodd-Frank Act, the Municipal Securities Rulemaking Board is still waiting for the Securities and Exchange Commission to issue its final rule defining who is a municipal advisor.

While SEC Chairwoman Mary Jo White has said that finishing the agency’s municipal advisor rule is a “priority,” said Lynnette Kelly, executive director of MSRB at a Wednesday briefing at The National Press Club in Washington, “she has a lot of priorities,” so timing of such a rulemaking is unclear.

Dodd-Frank gave the MSRB the authority to regulate municipal advisors, who, as Kelly explained, must act as fiduciaries. But MSRB can’t write its own rules for municipal advisors until the SEC finalizes its rule, which was mandated under Section 975 of Dodd-Frank.

An SEC spokesman told AdvisorOne that the municipal advisor registration rulemaking is a "high priority," but a date for Commission consideration has not yet been set.

The SEC released its first draft of its municipal advisor rule in December 2010, but MSRB as well as lawmakers complained the SEC’s definition was too broad.

Kelly also noted that MSRB would continue this year its “long-term project to enhance” its Electronic Municipal Market Access (EMMA) web site. EMMA, which launched via a pilot program in 2008 and officially went live in 2009, is a centralized online database that provides the public with free access to official disclosure documents for most municipal bonds issued in the U.S.

On Monday, MSRB announced that EMMA will now display both the initial offering dollar price and yield for a bond, when available. These changes, MSRB said, “provide more meaningful primary market information to market participants about the initial offering price and facilitate comparisons to trade data, which is normally displayed with both a dollar price and yield.”

Justin Pica, MSRB’s director of product management, noted at the Wednesday briefing that upcoming services that will become available on EMMA include alerts on 529 plans, including a plan description and guide; the ability to save a list of securities and “search that list of securities”; the ability to “export trade data”; and enhancements to EMMA’s search function.

MSRB is also now gathering information "on ways to improve the timeliness, fairness and efficiency of trade reporting in the municipal market," to help it develop EMMA 2.0, which "builds on the success of the [EMMA] website to date," said Kelly. "The goal is to create a central transparency platform that provides a comprehensive, interactive and real-time display of pricing-related market data."

Kelly said she envisioned "the platform evolving over time to become a centralized venue providing universal public access to pre- and post-trade municipal bond pricing and related disclosures." The MSRB, she said, "is taking an incremental approach and will rely heavily on market input at each stage of the development. We want to ensure we take into account the needs of investors and state and local governments but also industry practices and technology."

MSRB plans to "eventually replace the MSRB’s current trade reporting system with a new platform with capabilities to evolve over time to provide a real-time display of pricing-related market data," Kelly said.